Hog prices dropped sharply recently due in part to ample supplies. The latest Hogs and Pigs report predicts slaughter should be up about 1.5 percent compared to last year. Instead, slaughter during the past month has been up about 5 percent, according to Doane’s Agricultural Report. Hog supplies typically start rising in August and the increases continue into the Fall. Unless there is a surprise on the demand side, it will be hard to get prices back up to levels seen at the beginning of August.
Weakness in the cash market has pulled futures prices down. Over the past couple weeks, cash bids have dropped by about $6.00 per cwt, with national average prices back down below the $50.00 mark for the first time since mid-July. Packer margins have been dismal recently but cutout values have stabilized while cash hog prices have declined. This has led to a rebound in margins and could allow packers to pay more for hogs.
However, with ample supplies available, an increase in cash hog prices doesn’t seem likely. The wild card is China. If China starts buying aggressively, which does not seem likely given their recent banning of U.S. imports, the whole hog market could turn around on a dime.
Source: Doane’s Agricultural Report